C. How many shares are in the treasury? d. Could the company split its stock 2 f

Question

C. How many shares are in the treasury? d. Could the company split its stock 2 for 1 without getting authorization for additional shares? 9. (Share value) At the end of last year a company had 12 million shares ($2.50 par value) outstanding and total owners' equity of $96 million. Net income in the past year was $25 million, and 11.5 million shares were outstanding on average during the year. a. What is the remaining obligation, if any, of a share- holder who purchased shares from the company at $1.00 per share? b. What is the remaining obligation, if any, of a share- holder who purchased shares from the company at 10.00 per share? Calculate the company's book value per share at ear-end Calculate the company's earnings per share for the year.

Explanation / Answer

Book value per share = Owner's equity / Average no. of shares outstanding

= $96 mn / 11.5mn = $8.3478

Earnings per share = Net income /  Average no. of shares outstanding

= $ 25mn/11.5mn = $2.1739

Always average number of shares are used since it might be possible that during the end year, new shares may be issued or company goes for share buy-back which will skew the results.

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